POLITICO, "Watchdog calls for fraud crackdown at small business lending program"

Summary

In this POLITICO article of 06/25/2020, Zachary Warmbrodt reports on a Government Accountability Office report on how agencies used $2.6 trillion in Covid-19 relief funds. The article says the GAO found that the $670 billion Paycheck Protection Program had limited safeguards and insufficient guidance and oversight planning, and quotes the GAO that "there is a significant risk that some fraudulent or inflated applications were approved." It says more than 4.7 million businesses had taken loans totaling more than $516 billion. It also reports that the SBA and the Treasury Department planned to reveal borrowers with loans between $150,000 and $10 million, about 14 percent of program participants.

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Watchdog calls for fraud crackdown at small business lending program

The Government Accountability Office targeted the Small Business Administration in a sweeping new report Thursday.

The Paycheck Protection Program offers small business loans that can be forgiven in exchange for maintaining payroll. | Tony Dejak/AP Photo

By Zachary Warmbrodt

06/25/2020 10:36 AM EDT

Updated: 06/25/2020 03:56 PM EDT

Congress’ watchdog arm called on the Trump administration on Thursday to step up efforts to police the government’s massive small business rescue program after finding a significant risk of fraud and resistance to oversight at the agency running the bailout.

The Government Accountability Office targeted the Small Business Administration in a sweeping new report looking at how agencies have used $2.6 trillion in economic relief funds appropriated in response to the Covid-19 pandemic.

In the report, the GAO said the $670 billion Paycheck Protection Program, which offers small business loans that can be forgiven in exchange for maintaining payroll, had limited safeguards and insufficient guidance and oversight planning — all of which have increased the likelihood that borrowers may misuse or improperly receive loans.

“Because of the number of loans approved, the speed with which they were processed, and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved,” the GAO said. “In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness.”

The report will likely refuel long-running concerns about the rollout of the program, which has proven to be a hugely popular source of federal aid despite shortcomings that have frustrated borrowers, lenders and lawmakers.

GAO’s findings highlighted escalating tensions around the Trump administration’s reluctance to share data on the program’s operations and where more than $516 billion in loans have gone. More than 4.7 million businesses have taken the loans.

The administration resisted disclosing loan recipients until Friday, when the SBA and the Treasury Department announced plans to reveal the identities of borrowers with loans between $150,000 and $10 million, about 14 percent of the program participants. Administration officials had raised concerns about revealing proprietary and confidential information about borrowers, despite an SBA precedent of disclosing recipients in its other major loan program.

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